MILAN, July 28 (Reuters) - Telecom Italia is to bolster its Brazilian unit with the addition of a chief operating officer to help revive sales and get the company in shape ahead of possible industry consolidation, two people with direct knowledge of the matter told Reuters.
It will appoint Pietro Labriola, a long-standing Telecom Italia manager, to the new role at TIM Participacoes (TIM Brasil), in a move that could be announced as early as next week, the sources said. They did not wish to be named because an official decision has not yet been made.
Telecom Italia has said it might consider selling TIM Participacoes (TIM Brasil), Brazil’s No. 2 wireless phone company, for a lofty price and speculation of a sale has resurfaced since French group Vivendi became the Italian group’s biggest shareholder last month.
One of the sources said no decision had been taken yet and much would depend on how the Brazilian market evolves.
TIM Brasil, with a market capitalisation of $6.6 billion, faces rising competition and weak demand after years of growth in Latin America’s biggest market. It needs to address a changing market where pre-paid phone services, in which it is the market leader, are being hard hit by a sharp economic slowdown.
The company reported a 16 percent profit drop in net profit in the first quarter to 313 million reais ($93 million) due to falling sales and rising expenses.
Telecom Italia, which is facing shrinking revenues in Italy, derives around a third of its revenues from TIM Brasil, in which it holds a 66 percent stake. The Brazilian unit is seen as an obvious player in an expected consolidation of the Brazilian telecoms industry, either as predator or prey.
Labriola, an experienced telecoms executive who has been with Telecom Italia for 14 years, will be tasked with helping CEO Rodrigo Abreu to stem declining revenues ahead of possible tie-ups in the industry, the sources said.
“Regardless of how the M&A pans out, Telecom Italia wants to be in the right position so that it can play the field, either as a buyer or as a seller,” one of the sources said.
The 48-year old Italian manager, now chief transformation officer at Telecom Italia, will oversee commercial activities and information technology at TIM Brasil. He is also expected to be given a seat on the board of the Brazilian group, the source said.
TIM is investing in mobile Internet services, aiming for the Internet to provide about 60 percent of sales in the cellular phone market by 2020, up from 12 percent in 2010.
Telecom Italia declined to comment on the appointment, while TIM Brasil could not be immediately reached for comment.
Last year, Telecom Italia looked into acquiring indebted Brazilian rival Oi to create the country’s biggest telecom group, but later put the project on hold due to regulatory and other hurdles. Oi also hired bankers to seek possible partners in a joint bid for TIM Brasil but that is also on hold. ($1 = 3.3575 Brazilian reais) (Additional reporting by Guillermo Parra-Bernal in Sao Paulo; Editing by Susan Fenton)